Every investor in Smith & Nephew plc (LON:SN.) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 77% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's delve deeper into each type of owner of Smith & Nephew, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Smith & Nephew?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Smith & Nephew already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Smith & Nephew, (below). Of course, keep in mind that there are other factors to consider, too.
LSE:SN. Earnings and Revenue Growth December 1st 2024
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 5.1% of Smith & Nephew shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is BlackRock, Inc., with ownership of 6.5%. Cevian Capital AB is the second largest shareholder owning 5.1% of common stock, and The Vanguard Group, Inc. holds about 4.7% of the company stock.
A closer look at our ownership figures suggests that the top 22 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Smith & Nephew
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our most recent data indicates that insiders own less than 1% of Smith & Nephew plc. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own UK£11m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Smith & Nephew. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Smith & Nephew (of which 1 is potentially serious!) you should know about.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
